Banking changes improve access to homeownership

keysEven though prices are rising, the prospect of homeownership has been brought closer for many more South Africans over the past few months, thanks to some exciting shifts in bank lending practices.

These include declining deposit requirements and increases in both the number and size of home loans being approved, and their effects are revealed in the latest statistics from BetterBond, SA’s biggest mortgage origination group.

These figures show that the average percentage of home purchase price required as a deposit when lenders are considering home loan applications, has dropped from a two-year high of 23,3% reached in February this year, to 16% currently. In addition, notes group chairman Rudi Botha, the average approved bond amount is now 8,2% up year-on-year, and at its highest level since July 2011.

“These two factors, combined with the low interest rates we continue to enjoy, are more than compensating at the moment for higher property prices, and are thus also bringing homeownership within reach again for many South African families.”

This is clearly reflected, he says, in the fact that the average household income required to purchase the average home is the same now (R44 000 a month) as it was 12 months ago, even though the average home price has increased 10,9% in that time to R918 000.

The BetterBond group statistics, which cover a quarter of all residential mortgage bonds being registered in the Deeds Office, and include applications to, and bond grants from, all the major lending banks in SA, also show that applications from first-time buyers are on the increase again, following a slump in the nine months to end-March.

“First-time buyers accounted for 39% of all bond applications in July,” says Botha, “which is still some way off the 45% mark reached a year ago, but is a considerable improvement on the 35% low recorded in March. And here too, the big motivator has been the banks’ decision to slash deposit requirements from an average 14,6% of home purchase price in March, to just 7,9% currently.”

During the same period, the average approved bond size for first-time buyers has risen by 8,9%, while the average home purchase price for first-time buyers has risen by 12,5%. For those purchasing for the first time, the effect of this is that the average household income required to purchase the average home, has risen by just 4,5% in the past 12 months. (See table)

Table

Botha cautions however, that while the banks may be on a drive now to increase secured lending such as home loans, which are a lot less risky for them than unsecured personal loans, overdrafts, and credit card balances, their credit granting criteria are still very strict. Potential borrowers are thus well-advised to apply through a mortgage originator such as BetterBond, which will employ a multiple-submission process to different lenders, in order to give them the best chance of success.

“BetterBond is currently able to get approval for three out of every four applications it submits, but our statistics show that 56% of applications only succeed on the second or third submission,” he says.

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About BetterLife Home Loans

Since 2003 BetterLife Home Loans has been SA’s No.1 Bond Originator, handling the entire home loan application process on your behalf – free of charge! Our aim is still to source the best interest rate for you by submitting your home loan application to all the major banks. There is no easier way to apply for a Bond or Home Loan in South Africa!

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